Far from being able to relax, for economists, that the Government has closed the debt restructuring process Under foreign law it is only the starting point for various measures that you have to take to stabilize the economy and give a boost to revival. Among the variables to be normalized are the fiscal deficit, the monetary issue, the distortions in the exchange market and inflation. In addition, once the agreement with the bondholders has been concluded, the Minister of Economy, Martín Guzmán, You will have to start negotiations with the main creditor of Argentina: the International Monetary Fund (IMF).
In the short term, the news will positively impact the financial market, as was seen today as rumors of a possible agreement increased, with an average rise of 13% in stocks, 4% in bonds and a 6.6% drop in country risk (financing cost). Expected tomorrow these trends are accentuated. Regarding the dollar, economists project less pressure on the foreign exchange market, but they do not guarantee that this will necessarily translate into a drop in the price of the currency.
“The agreement clears a lot of uncertainty for the future, because although it is not thought that it will trigger investment projects, it does rules out a vulture-funded trial scenario in New York courts, that we already know him and that was very negative for Argentina. The logical thing is that it will impact a rise in stocks and bonds and a decrease in country risk. Regarding the dollar, the price of the currency is not reflecting the news of the exchange, but local imbalances. The agreement is a good start to solve the rest of the problems, “said Fernando Marull, economist and director of FMyA.
Esteban Domenecq, director of Invecq, agrees that the arrangement will generate a summer stock market, which it will unzip the monetary front and give the government time to work on the underlying problem within the framework of an economic program. “A summer opened, but without a boom in optimism. It will be necessary to see if the government takes advantage of this or not, to present the program that aims to correct the imbalances, which will generate a shock of confidence and improve expectations. The debt settlement is the starting point to see how we solve the problems “, he pointed.
Regarding the exchange rate, economists agree that an agreement decompresses the pressure on the demand for the dollar, although currency gaps are not expected to close immediately. “Achieving an agreement was a necessary but not sufficient condition for the dollar to calm down. Perhaps it will have relief, especially in the pressure on the official dollar; last month a lot of solidarity dollar was being sold [3,3 millones de personas demandaron US$757 millones]. The first step of the agreement is to lower the uncertainty and little by little Argentina will be able to think about the day after, “said Lorenzo Sigaut Gravina, director of Ecolatina.
On the agenda, Guzmán’s next challenge will be to renegotiate the Stand-by agreement with the IMF, since in 2021 it should begin to repay the $ 44 billion loan, with highly concentrated maturities in the next three years that become difficult to pay.
“Negotiations with the Fund will require a consistent monetary and fiscal program. In addition, it will ask for reserves to be accumulated, because they are very low, and for progress in some structural reforms. On the fiscal level, the reduction in spending will start of a giant deficit before the interest payment caused by the pandemic. How will it be done to converge to the surplus of 1% of GDP that Guzmán estimated for the coming years? “, asked Daniel Artana, chief economist of the FIEL foundation.
“There are two criteria: adjust for the economic cycle, so that the fiscal result is neutral (everything that the economy and the revenue recovers that will lower the deficit), and the balance will be financed with an inflation tax. But the Government it must be able to generate confidence so that the demand for money does not fall, and that requires a consistent economic program “, added.
In this sense, Marina Dal Poggetto, executive director of Estudio EcoGo, agreed that the debt settlement is “a necessary condition to avoid a disaster, but not a sufficient condition”.
“In the short term, the government must decompress the maturities of the Fund and give a sign of fiscal consolidation for next year, which is also electoral. If this year’s hole is kept financed only with monetary policy, the risk of aborting the logical rebound of the economic recovery increases. The reactivation will depend on the order of the policy and the possibility of intervening in the distributive bid, “said the economist.
Francisco Gismondi, director of Macroeconomics at Empiria Consultores, meanwhile, indicated that “advances in the swap can lower financial and exchange rate volatility.” “In addition, it would ensure that the local swap being discussed in Congress is successful, with almost full acceptance. Another important derivation is that would enable Argentine provinces and companies to move forward with their respective debt swaps or with something (less) of new issues (even if to renew maturities), “he said.
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